A whole lot of consumer startups have shut down entirely in India, without creating any semblance of value, without solving any problem whatsoever, and without leaving any meaningful lessons for other entrepreneurs to use. Absolutely no salvage value came out of so many $3–20M investments. A host of local services that were supposed to happen on a click still happen with five phone calls and frayed nerves. Online restaurants still need multiple times more capital per rupee of revenue than delivery chains. And we still prefer to buy our furniture in showrooms, so startups have not opened those for us.

As a student of startup formation, I am intrigued about what went wrong and if there are any patterns to this systemic collapse. Nothing was wrong with most of the essential inputs — people, money, ideas et al. I firmly believe that the people involved in these startups, founders and investors, were all very smart and capable. The business models chosen originally were usually well thought out and logical. Consumer space is booming and is unquestionably the most lucrative, though challenging, value creation opportunity available today. And in a country like India, having $3–5M is a very very meaningful advantage over everybody else.

People, money, ideas. All these were the ‘necessary’ conditions for success, but not ‘sufficient’.

Every investor swears by Market, Team, and Business Model. There was a key ingredient missing. Time and Patience.

Having Time means you are patient enough to solve a problem elegantly. Having Time means that you are persistent enough to keep trying to solve the problem you chose to solve. Having Time means that you have a horizon long enough to show traction with an elegant solution without worrying about your competition raising money. Having time means that you can stick to your conviction.

The process of innovation is quite non-linear. Even when founders think they have a very elegant solution to a very big problem, they invariably face many hurdles, small and big. The tech doesn’t behave when they need it to, and their consumers and even employees and vendors don’t act as expected. But disruption means that the startup uses the best possible technology options for every piece of the value chain, and converts the theoretical vision into reality. And the process of innovation needs a very uncompromising attitude from the founders.

Some things that seem reasonable but can kill a startup sound like

‘We wanted to eliminate brokers, but they have inventory, so lets start with bringing them on board first.’

‘We want to give a loan on a click but since we are not Uber, let’s do some ‘basic’ offline verification.

‘People buy clothes online but that may not be true for furniture, so let’s open some showrooms.’

‘People need to see food before eating, so lets open some outlets.’

And then there are things that some investors just ‘suggest’ with all sincerity but these may inadvertently become mantras for startups

‘We gotta raise before the spaces becomes hot’

‘Last man standing’

‘Critical mass is important, even if we have to spend on discounting and marketing’

‘We need to expand the market and be meaningful.’

Most investors ask for nonlinearity in capital and manpower deployment, but at the same time expect the startup to do consistent month on month growth from the day they invest. This is the same pressure listed cos face and hence they cannot disrupt or even fight disruption. It will be foolhardy to assume that they don’t have access to the other ingredients of success.

Redbus never gave a discount, and focused all its efforts solely on aggregating inventory. It needed just a few million dollars of capital in its lifetime.
Lendingkart has not used field/offline credit staff for its 10000 plus loans thus far. It has burnt less than 25% of the capital it has raised.
91mobiles is today the largest standalone gadgets destination and has stayed true to its focus on being a media property for gadgets. It has raised 40X less capital than its competitors.
Sharechat does not spend more than 5% of its money on advertising, because it believes in growing only organically.

You win a market if you persist with your experiments long enough to solve a problem. Funding could buy you time to solve something, along with the right scale to experiment. Funding could buy you patience to educate and convert the market. Or, funding could make you impatient for growth, and if people won’t buy on the app, you will use call centers, you will tell your consumers ‘I know you are not ready to buy, but I need my numbers, so can you just use this 50% off coupon right now?’ Funding can help you change the way things work, or it can make you look just like the incumbents you were going after.

What will your funding buy for you?